Medicare’s prospective payment system (PPS) did not lead to significant declines in the quality of hospital care. Mortality rates declined for all patient groups examined, and other outcome measures also showed improvement. However, more Medicare patients were discharged from hospitals in unstable condition after PPS was implemented.
Does Medicare’s prospective payment system improve hospital quality?
Medicare’s prospective payment system (PPS) did not lead to significant declines in the quality of hospital care. Mortality rates declined for all patient groups examined, and other outcome measures also showed improvement. However, more Medicare patients were discharged from hospitals in unstable condition after PPS was implemented.
How has the prospective payment system changed the hospital industry?
Introduction The implementation of the prospective payment system (PPS) has produced major changes in the hospital industry and in the way hospital services are used by physicians and their patients.
What are the consequences of the prospective payment system?
The implementation of the prospective payment system (PPS) has produced major changes in the hospital industry and in the way hospital services are used by physicians and their patients. Hundreds of researchers and policy analysts have written about the consequences of PPS and commented on the principles of health care policy that PPS embodies.
When did Medicare change from fee for service to PPS?
Faced with sharply escalating Medicare costs in the early 1980s, the federal government completely revised the way Medicare pays hospitals for treating elderly patients. The governing agency, the Health Care Financing Administration, switched from a retrospective fee-for-service system to a prospective payment system (PPS).
How does prospective payment system affect Medicare?
Under Medicare's prospective payment system (PPS), hospitals are paid a predetermined amount per Medicare discharge. This departure from cost-based reimbursement may give hospitals an incentive to economize on inpatient services.
How does Medicare impact the healthcare system?
Providing nearly universal health insurance to the elderly as well as many disabled, Medicare accounts for about 17 percent of U.S. health expenditures, one-eighth of the federal budget, and 2 percent of gross domestic production.
Why did Medicare implement the prospective payment system?
Rather than validating cost increases by reimbursing hospitals for the costs that they have incurred, the Medicare prospective payment system (PPS) allows the Federal Government to become a more prudent purchaser of hospital care by paying a fixed price for a known and defined product—the hospital stay.
What are the main advantages of a prospective payment system?
A prospective payment system holds payers and providers responsible for that portion of risk that they can effectively manage. Benefits of prospective payment systems extend to both payers and providers when there is appropriate and efficient alignment of risk.
What is Medicare and why is it important?
Medicare provides health insurance coverage to individuals who are age 65 and over, under age 65 with certain disabilities, and individuals of all ages with ESRD. Medicaid provides medical benefits to groups of low-income people, some who may have no medical insurance or inadequate medical insurance.
What is prospective payment system in healthcare?
A Prospective Payment System (PPS) is a method of reimbursement in which Medicare payment is made based on a predetermined, fixed amount. The payment amount for a particular service is derived based on the classification system of that service (for example, diagnosis-related groups for inpatient hospital services).
How Does Medicare pay for hospitals?
Inpatient hospitals (acute care): Medicare pays hospitals per beneficiary discharge, using the Inpatient Prospective Payment System. The base rate for each discharge corresponds to one of over 700 different categories of diagnoses—called Diagnosis Related Groups (DRGs)—that are further adjusted for patient severity.
What do prospective payment systems do quizlet?
A method of determining reimbursement to health care providers based on predetermined factors, not on individual services. The Prospective Payment System established as mandated by the TEFRA of 1983 to provide reimbursement for acute hospital inpatient services.
What are the disadvantages of the prospective payment systems?
Prospective payment plans also come with drawbacks. Because providers only receive fixed rates, some might seek to employ cost-cutting measures to maximize profits while not necessarily keeping their patients' best interests in mind.
What role did the prospective payment system play in the downsizing of US hospitals?
What role did the prospective payment system play on the downsizing of U.S. hospitals? Many hospitals had to close because they could not cope with the new method of reimbursement. The hospitals that continued to operate had to take unused beds out of service.
What changes did Medicare DRGs cause in hospital behavior?
What changes did Medicare DRGs cause in hospital behavior? They became concerned with reducing lengths of stay for aged patients and became concerned with physicians practice behaviors.
What is PPS in healthcare?
The governing agency, the Health Care Financing Administration, switched from a retrospective fee-for-service system to a prospective payment system (PPS). Under PPS, hospitals receive a fixed amount for treating patients diagnosed with a given illness, regardless of the length of stay or type of care received.
Does mortality increase after PPS?
Mortality rates for patients with the given conditions did not increase after PPS. Across all of these measures, mortality declined for all five patient groups. Similarly, the other outcome measures evidenced no post-PPS declines in quality of care.
When did Medicare start paying for inpatient care?
Medicare's prospective payment system (PPS) for hospital inpatient care was implemented in October, 1983. Under this system, payment for care is made on a fixed price per case, based on the average cost for a patient in a given Diagnosis Related Group (DRG).
Who analyzed the effectiveness of care provided to Medicare beneficiaries during hospitalization and thereafter in 1983-85?
In a second study, Krakauer (HCFA, 1987) analyzed the effectiveness of care provided to Medicare beneficiaries during hospitalization and thereafter in 1983-85. He assessed mortality rates, rates of hospital readmission, use of ambulatory and supportive care and mortality rates.
What was the post hospital mortality rate in 1983?
In 1983 and 1984, post-hospital mortality rates were 5.9 percent at 30 days after the first hospital admission and 19.7 percent at one year after the first hospital admission. In 1985, the corresponding rates were 6.8 percent and 21.2 percent.
What is hospital readmission?
Hospital readmissions refer to any pair of hospital stays (e.g., first and second, second and third, etc.). In this way, comparisons between 1982-83 and 1984-85 patterns would include all hospital readmissions, rather than, for example, a "benchmark" first readmission during the observation window.
Zipcode to Carrier Locality File
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Provider Center
For a one-stop resource web page focused on the informational needs and interests of Medicare Fee-for-Service (FFS) providers, including physicians, other practitioners and suppliers, go to the Provider Center (see under "Related Links" below).
Acknowledgments
Executive Summary
- Medicare's prospective payment system (PPS) reimburses hospitals on a casemix adjusted, flat-rate basis. This method of payment provides incentives for hospitals to serve patients as efficiently as possible, possibly by reducing length of stay and increasing use of skilled nursing facility (SNF) and home health (HHA) care. While increased SNF and H...
I. Introduction
- This report describes a study to measure changes in the pattern of Medicare service use resulting from the implementation of the prospective payment system (PPS) for Medicare hospital reimbursement. Distinct from prior studies which addressed the general Medicare population, our analysis focused on PPS effects on disabled elderly Medicare beneficiaries. Our specific aims w…
II. Background
- Medicare's prospective payment system (PPS) for hospital inpatient care was implemented in October, 1983. Under this system, payment for care is made on a fixed price per case, based on the average cost for a patient in a given Diagnosis Related Group (DRG). This system of payment provides incentives for hospitals to use resources efficiently, but it contains incentives to avoid …
III. Methods
- In the following sections, we describe the data source, the analysis plan and the statistical methods employed in this study.
IV. Results
- This section presents the results of the analyses of the pre- and post-PPS utilization of Medicare services experienced by the noninstitutionalized disabled elderly beneficiaries. The results are presented in five parts. The first part presents a general context of mortality and Medicare service use of the various subgroups of the total Medicare beneficiary population based on the total pop…
v. Discussion
- This report presented results from a study to examine the patterns of Medicare hospital, skilled nursing facility and home health agency services before and after the implementation of the hospital prospective payment system. Unlike other studies assessing PPS effects, our study population focused on disabled, noninstitutionalized. Medicare beneficiaries, and subgroups am…
VI. Conclusions
- The implementation of a prospective, fixed rate payment system for hospitals under Medicare created both a perception that hospital efficiency could be improved and concern that incentives for efficiency could result in adverse consequences for Medicare beneficiaries. Because of the recent introduction of PPS, relatively few evaluation results have been available to study its effe…
References
- Conklin, J.E. and R.L. Houchens. 1987. "PPS Impact on Mortality Rates: Adjustments for Case-Mix Severity." Final Report. HCFA Contract No. 500-85-0015, October 6. DesHarnais, S., E. Kobrinski, J. Chesney, et al. 1987. "The Early Effects of the Prospective Payment System on Inpatient Utilization and the Quality of Care," Inquiry, 24:7-16. Fitzgerald, J.F., L.F. Fagan, W.M. Tierney an…
Appendix A
- In the GOM procedure, a person may be described by more than one continuously varying case-mix dimension. Because of this, GOM is distinct from the classification methodology used to identify the DRG categories or hospital reimbursement by which homogeneous discrete groups are defined in terms of the variation of a single criterion (i.e., charges or length of stay) except w…